Other Views: Two-year budget deal is simple and simply extraordinary

By Staff, Bloomberg News

Thursday, December 12, 2013

It’s hard to imagine how something as pipsqueak as an $85 billion, two-year budget deal could be so consequential. Yet the agreement struck Tuesday could mark the end of paralyzing budget politics, avoid another government shutdown, remove Washington as a roadblock to recovery and help spur economic growth.

Aside from the usual partisan grumbling, the biggest criticism is that the deal is insufficiently ambitious. This misses the point: The great virtue of the agreement, which includes genuine if minor reforms, is that it shows how simple budget agreements can be when the two sides set their minds to it.

Democratic Sen. Patty Murray of Washington and Republican Rep. Paul Ryan of Wisconsin, chairmen of their respective budget committees, negotiated in private for weeks without grandiose floor speeches or dramatic denunciations of the other’s lack of good faith.

The package, which awaits House and Senate votes, is tiny in the larger context of a $17 trillion economy. Both parties also sidestepped their larger ambitions — cutting entitlement programs (which Republicans want) and raising taxes on the rich (which Democrats favor).

On the plus side, the deal calls for modestly stimulative spending increases in 2014 and 2015. In 2014, President Barack Obama would get a $45 billion kitty he can direct toward areas that have endured painful cuts, such as scientific research, public-works spending and Head Start. The Murray-Ryan deal also smartly replaces about $60 billion of the mindless, across-the- board spending cuts known as sequestration due to take effect over the next two years.

To help offset the new spending, the agreement would drum up $20 billion by raising the fees passengers pay for airline security, increasing federal workers’ pension contributions and raising the premiums companies pay the government to guarantee pensions.

On the negative side, the deal doesn’t extend emergency unemployment benefits, abandoning the plight of the long-term jobless in an attempt to attract support from deficit hawks. And it ignores the U.S.’s biggest fiscal problems, especially the huge unfunded health-care and retirement obligations for the elderly. Even the claim that this agreement reduces the deficit is a fudge factor: It rests on an extension of a 2 percent cut in payments to Medicare providers in 2021 and 2022 — eons away in congressional time.

As with all budget agreements, this one has features both sides will hate, and they’ve already started saying so. Many tea party-backed Republicans refuse to support the plan because the new spending comes from breaking budget caps Congress agreed to in 2011. Some Democrats are just as unhappy about not extending unemployment benefits and cutting government pensions.

To those who would vote the agreement down, Ryan had this message: “In divided government, you don’t always get what you want.” Coming from the author of past budget manifestos calling on Republicans to hold out for radical entitlement and tax cuts, that is an extraordinary statement.

No, this deal won’t put the United States on a path to long-term fiscal stability. Yet it does avoid another government shutdown and end the budget wars for two years. In this Congress, that’s no small achievement.